EDF Beats GDF Suez to Build New Nuclear Reactor

By Tara Patel

Jan. 30 (Bloomberg) -- Electricite de France SA, Europe’s biggest power producer, beat off competition from GDF Suez SA to win French government approval to spearhead development of a second new-generation nuclear reactor.

The Evolutionary Power Reactor, or EPR, will be built at an existing nuclear site at Penly, northern France, starting in 2012, French President Nicolas Sarkozy said in an e-mailed statement. EDF, which is based in Paris, will have majority control over a company created to oversee the project. GDF Suez “will be associated” with the venture.

“EDF will have to put cash down to invest,” Chicuong Dang, an analyst at Richelieu Finance in Paris, said by telephone today. “Earnings will come over the longer term. Costs of building the EPR have risen while French power rates remain low.”

The decision ends months of speculation about which utility would pilot the project and where it would be located. EDF began construction of a 1,650-megawatt EPR at Flamanville in Normandy more than a year ago. The reactor was designed by Areva SA, the world’s biggest builder of atomic plants. EDF, which has estimated the cost of the EPR at 4 billion euros ($5.2 billion), plans similar models in the U.K. and the U.S., and has already started developing reactors in China.

Shares Gain

EDF rose 0.9 percent to 39.32 euros as of 10:10 a.m. in Paris. GDF Suez was also 0.9 percent higher at 31.10 euros. The stocks have dropped 6 percent and 12 percent, respectively, since the beginning of the year.

The latest reactor, the country’s 60th, is targeted for completion in 2017 and other investors may also participate, the statement said, leaving open the possibility of a third EPR in the future. “The government acknowledges the willingness of GDF Suez to lead develop and operate the next EPR.”

Both EDF Chief Executive Officer Pierre Gadonneix and GDF Suez SA CEO Gerard Mestrallet had signaled their interest in overseeing the project.

EDF, which operates 58 atomic plants in France, will join up with other investors in the reactor “in particular GDF Suez,” the state-controlled utility said in a separate e-mailed statement today.

GDF Suez operates seven atomic reactors in Belgium through its Electrabel SA unit. The European Commission has put pressure on the French government to increase competition on the national power market, now dominated by former monopoly holder EDF.

Sign Deal

EDF signed a deal with Enel SpA in 2007, giving Italy’s largest utility a 12.5 percent stake in the Flamanville generator and an option to invest in five more plants in France. EDF has put Italy on its list of countries, including China, the U.K. and U.S., where it wants to expand nuclear operations.

GDF Suez has agreements to use power from two French reactors run by state-controlled EDF at Tricastin and Chooz. Mestrallet has said he wants to operate EPRs by 2020 and that France is “obviously a priority.”

French power exports exceeded imports by 46.6 terrawatts hours, 15 percent less than in 2007, according to data published earlier this year by Reseau de Transport d’Electricite, the wholly-owned grid operator of EDF. The utility is also having to rely on imports to meet peak demand during hot or cold spells.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net